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stainless 05-02-2007 01:23 PM

Our Tax System Explained In Simple Terms
Simple Scout's "Urine Test" thread got me thinking.
I got this via email a while back....hope you all enjoy it.
I hope this isn't a repost.

Federal Tax System Explained In Simple Terms

Sometimes politicians, journalists and others exclaim; "It's just a tax cut for the rich!" and it is just accepted to be fact. But what does that really mean? Just in case you are not completely clear on this issue, I hope the following will help. Please read it carefully. Let's put tax cuts in terms everyone can understand.

Suppose that every day, ten men go out for dinner and the bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this:

a.. The first four men (the poorest) would pay nothing.
b.. The fifth would pay $1.
c.. The sixth would pay $3.
d.. The seventh would pay $7.
e.. The eighth would pay $12.
f.. The ninth would pay $18.
g.. The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." Dinner for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still eat for free, but what about the other six men, the paying customers?
How could they divide the $20 windfall so that everyone would get his 'fair share?' They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to eat their meal. So, the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:
a.. The fifth man, like the first four, now paid nothing (100% savings).
b.. The sixth now paid $2 instead of $3 (33% savings).
c.. The seventh now paid $5 instead of $7 (28% savings).
d.. The eighth now paid $9 instead of $12 (25% savings).
e.. The ninth now paid $14 instead of $18 (22% savings).
f.. The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man, "but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than me!"

"That's true!!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start eating overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, PhD
Professor of Economics
University of Georgia

Scout 05-02-2007 01:41 PM

Now THAT's good!

stainless 05-02-2007 01:57 PM

You wouldn't believe the flames I got from that post on the TTORA (Tacoma) Board.

I am just glad I'm not a weak-minded sheep that believes everything Al, journalists, and the left wing liberals shove in my face.

Scout 05-02-2007 01:59 PM

You really got flamed for that? What the hell were they saying?

stainless 05-02-2007 02:20 PM

The flames were just plain ol, run of the mill profanity laced rants. There weren't any logical or even coherent arguments.

There were alot of people on there talking bad about the "fair tax", too.

I posted the same thing on a predominantly H1/AMG populated Hummer forum (of which I am also a member) and got a lot of really well thought out and eloquently written responses. Go figure.

Adventurous 05-02-2007 02:22 PM

It really puts things into perspective. The rich man might save the most $$$ but the percentage that he is saving is far less than the rest of the men.

stainless 05-02-2007 02:31 PM

Exactly right, but try explaining that to the uneducated liberal sheep that are so plentiful now-a-days.

Dare2BSquare 05-02-2007 09:27 PM

So you are saying that I will get less if I pay nothing. THAT AIN'T FAIR. Oh, but I still get to eat? Cool.

Can I have a to go box for the buffet?

OdhinnsChick 05-02-2007 09:40 PM

Everyone has their part to play.

Dare2BSquare 05-02-2007 09:48 PM


Originally Posted by OdhinnsChick (Post 78493)
Everyone has their part to play.

And their part to pay?

OdhinnsChick 05-03-2007 12:51 AM


Originally Posted by Dare2BSquare (Post 78503)
And their part to pay?

Would seem that way. :D

Monjo 05-03-2007 08:00 AM

This was very interesting to see it laid out in such simple terms. I made sure I called and thanked everyone for lunch!

JCS05Rubi 05-03-2007 08:05 AM

im a poor college kid, so I better do the same Monjo :p

Odhinn 05-03-2007 08:18 AM

Very nice post stainless. Our tax system has its faults IMO, but everyone does have to pay to play. And this story is a great basic explaination of the greener grass on the other side of the fence.
I can't believe you actually said the L work in public:D :D :D

stainless 05-03-2007 08:33 AM

:D yep, thats right

I'm reminded of a quote I heard several years ago.
"Say what you mean and mean what you say and many will trust you and respect you."
I can't remember who said it...John Wayne, or maybe Ronald Reagan... ?

OdhinnsChick 05-03-2007 09:15 AM


Originally Posted by stainless (Post 78627)
:D yep, thats right

I'm reminded of a quote I heard several years ago.
"Say what you mean and mean what you say and many will trust you and respect you."
I can't remember who said it...John Wayne, or maybe Ronald Reagan... ?

I think my grandfather said that. :D

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